Employee Turnover and Its Impacts on Business Objectives

Description of the Problem

Aburumman et al. (2022) defined employee turnover as the rate at which employees leave a company and must be replaced. This issue impacts both the short-term and long-term business objectives of most organizations. It has emerged as one of the pressing concerns within organizations due to its significant challenge to both short-term and long-term business objectives. The phenomenon of employees leaving an organization at an alarming rate has emerged as a recruiting issue that demands serious attention.

High employee turnover has a significant impact on an organization’s effect on the financial stability of the firm, productivity, culture, reputation, and long-term growth prospects. It is a major concern to HR professionals, and strategies to reduce it should be a major talking point for many employees. According to Bluehost blog reports (2021), at least 41% of American workers considered quitting their current job, while 46% were planning to transition to another career path in 2021. In addition, the report also suggests that around 59% of employees in America are experiencing burnout and, therefore, may consider quitting their jobs (Bluehost blog, 2021). Firms urgently need to address this issue by examining the implication of this problem. To begin with, turnover substantially burdens the organization’s financial resources. According to Skelton et al. (2022), the costs associated with hiring, recruiting, and training new staff are significant and can strain most organizations’ budgets.

The frequent departure of experienced staff creates a sense of instability and uncertainty within an organization. This may eventually lead to reduced collaboration, decreased productivity, and negatively impact the quality-of-service delivery (Skelton et al., 2022). The long-term implication is reputational damage. As a result, potential candidates may be discouraged from considering employment with the company as they perceive high turnover as a red flag. Therefore, a proactive measure is required to address the root causes of turnover. The next step is implementing strategies and courses of action to improve employee retention and create a positive work environment fostering loyalty.

Alternatives Considered (Research/Best Practices)

Based on research and past best practices, several alternatives that organizations often consider to reduce high employee turnover rates are:

1. Improve employee engagement.

Engaged employees tend to be more committed and less likely to leave. Organizations have implemented strategies to improve engagement through regular communication, opportunities for development and growth, and fostering a positive work culture. According to a Gallup study, companies with highly engaged workforces outperform their peers by 147% in earnings per share (Sanger & Eby, 2019).

2. Offer competitive compensation and benefits.

Providing competitive pay and benefits packages can help attract and retain top talents. Research has shown a positive correlation between employee turnover and compensation levels (Indeed, n.d.). Conducting regular market research to ensure salaries are competitive can be beneficial. For example, adjusting compensation to “account for inflation, cost of living will prevent employees from wanting to seek more money elsewhere (Indeed, n.d.)

3. Hiring the right employees.

Employers must take the time to properly evaluate their candidates and ensure they fit the company and its culture (Indeed, n.d.). With this comes the transparency of what the job entails, clear expectations, and salary expectations (Indeed, n.d.). These two have proven to “eliminate any anxiety they have about possibly taking on a role beyond their area of expertise” (indeed, n.d.).

4. Provide opportunities for career development.

Employees often appreciate opportunities for growth and advancement. Organizations can offer training programs, mentorship, and clear career paths to enhance employee retention. A Society for Human Resource Management (SHRM) study found that career development opportunities were among the top factors in employee retention (SHRM, n.d.).

5. Enhance work-life balance.

Promoting work-life balance is crucial for employee wellbeing and retention. According to A study published in the International Journal of Environmental Research and Public Health, it is significant to highlight the importance of work-life balance in reducing turnover rates (Ho, 2023). Organizations in the past have offered flexible work arrangements, paid time off, and wellness programs (Ho, 2023).

6. Trust in Management.

It is found that highly engaged employees often have confidence in their leaders (Sanger & Eby, 2019). Therefore, to accomplish this, employees must trust their leaders to lead them on the right path.

7. Exit interviews.

Employee turnover is unique to each organization. For this reason, exit interviews can help provide reasons for leaving a specific organization. Conducting these interviews effectively is crucial in determining what can be done differently to increase employee retention. This can be done by having a third party conduct the interviews to prevent biases (Mahan, 2022). Companies have used open-ended questions to “avoid limiting the scope of what can be learned” (Mahan, 2022). This type of research has helped organizations collect accurate data to gauge progress on retention methods (Mahan, 2023).

It is important to note that while these alternatives have been supported by research and best practices, their effectiveness can vary depending on the organization and its specific context. It is crucial for organizations to continuously assess their employee turnover challenges, monitor the impact of implemented strategies, and make adjustments as needed.

Proposed Course of Action

Employees voluntarily leave a corporation because of internal or external reasons. The internal reasons come from the individual and their personal lives, while the external reasons result from certain workplace conditions. According to a Pew Research Center survey, the internal reasons for Americans who quit a job in 2021 are childcare issues (24%) and a desire to relocate (22%) (Dewar, 2022). Moreover, the main external reasons include but are not limited to low pay (33%); lack of career opportunities for growth or advancement (33%); lack of proper recognition/ feeling disrespected at work (35%); inadequate benefits (23%); time-consuming and excessive workload (20%); and poor company culture (Dewar, 2022).

Based on these reasonings and the mentioned strategic objectives, the proposed course of action to resolve this issue is shown in Table 1.

Table 1

The Course of Action to Reduce A High Turnover Rate

Given the proposed course of action in Table 1, further analysis is required to select the best actions for the company. Selection can be done through the application of some form of criteria: the pros and cons of each alternative. Negative criteria, which give reasons not to select an action, may include costs, risks, difficulty, hassle, and trouble (Changing Minds, n.d.). Positive criteria, which highlight the benefits of an action, include key aspects such as whether goals will be met, how well they might be met, how easy it will be done, and the implementation duration (Changing Minds, n.d.).

The Barriers and Supporting Conditions/Financial Requirements

The barriers and financial requirements should be taken into consideration in the course of the action selection process. This is imperative as organizations often attempt to apply strategies or changes that must be supported by company culture, federal legislation, or the company’s financial capability (Senyucel, 2009).

Corporate Culture

The quality of HR activities, such as hiring, onboarding, and training practices, plays a huge role in retaining potential and current employees within organizations (Halvorson, 2015). Creating and maintaining an environment that fosters an attitude of support and shared learning has been shown to increase employee retention by 96 % (Beheshti, 2019). Strong leadership enhances and encourages work cultures where employees rush to refer and recruit other great candidates that fit into the culture. A healthy work-life balance exists when employees are working and engaged in their jobs while immersing themselves fully in activities that improve employee engagement (work dinners, functions, and trips). Social events outside of work also have the potential to create strong working bonds and company loyalty. The HR team should create and develop a corporate culture which will be the supporting condition to implement the proposed course of action mentioned in Table 1.

Federal Legislation

Federal legislation is another source of complexity that can be an additional barrier to employee retention. Depending on where facilities are located, the U.S. federal laws directly affect the work environment in areas such as human rights (discrimination, health & safety, harassment etc.), the process of hiring and selection, minimum wage, and occupational safety and health. Therefore, all work activities, including hiring and training, must comply with the law and other related regulations.

Financial Requirements

Strong recruitment, hiring, and onboarding processes can be costly. Expenses related to this include the costs for job advertising; conducting interviews, employee selection and reference checks; producing contracts; producing necessary materials for onboarding; and holding orientation training for recruits. A third party can do these activities, but hiring external recruiting agencies to search for reliable and suitable candidates also costs money. Other training and development for current employees are another substantial financial consideration when shouldering the loss of turnover. Not to mention all other costs associated with organizing and planning various team-building activities and the strategy to provide a health care facility in the workplace. However, further financial analysis must be done before implementing strategies or actions to reduce the high turnover rate. The key point is to carry out actions that are more beneficial to the company in the long term.

Implementation Plan to Reduce Turnover

The first implementation plan is assessing the current turnover and identifying root causes. This can be done by analyzing historical turnover data, exit interviews and employee surveys to investigate the root causes of turnover. The data-driven approach will help employers to identify specific departments experiencing turnover and help them prioritize areas for intervention. HR professionals should also prepare for the cost of losing an employee. According to the Chally report (2022), it is estimated that 42 days are needed to fill an open position left by an employee on average in the United States. The report also suggests that the cost of turnover can range from 1.5 to 2 times the employee’s annual salary. This cost accounts for the resources used in recruitment, training, lost productivity, and knowledge transfer. The cost of losing an employee can be significant and should be considered part of the budgeting process.

Further surveys and investigations will be carried out regarding the plan to provide childcare facilities in the workplace. The facilities will only be provided whenever more than 10 employees are interested in the program. Facilities can be developed using existing rooms in the office whenever possible to reduce costs. The budget for providing these facilities should be around $10,000 per office.

Conclusion

High employee turnover is a significant challenge for many organizations, leading to increased costs, decreased productivity, and reduced employee morale. To address this problem, developing and implementing a comprehensive employee engagement plan that focuses on improving the work environment, enhancing employee satisfaction, and promoting career development opportunities is essential. While there may be some challenges to implementing these plans, the potential benefits, including increased employee retention, improved productivity, and enhanced reputation, make it a worthwhile investment. By carefully considering the barriers, supporting conditions, and budget estimates, organizations can successfully implement an employee engagement plan that leads to a more stable and sustainable workforce.

References

Aburumman, O., Salleh, A., Omar, K., & Abadi, M. (2020). The impact of human resource management practices and career satisfaction on employee’s turnover intention. Management Science Letters, 10(3), 641-652. Retrieved from http://m.growingscience.com/beta/msl/3476-the-impact-of-human-resource-management-practices-and-career-satisfaction-on-employees-turnover-intention.html

Beheshti, N. (2019). Ten timely statistics about the connection between employee engagement and wellness. https://www.forbes.com/sites/nazbeheshti/2019/01/16/10-timely-statistics-about-the-connection-between-employee-engagement-and-wellness/

Bluehost. (2021, November 19). Human resources: employee turnover and things you can do to reduce it. https://www.bluehost.com/blog/how-to-reduce-employee-turnover-2/

Chally (2022). The real cost of employee turnover. https://chally.com/blog/causes-and-cost-of-unwanted-turnover/

Changing Minds. (n.d.). Selecting the best course of action. http://changingminds.org/explanations/sift/formulate_selection.htm

Dewar, J. (2022, October 5). Prevent employee turnover: 15 strategies that work. https://www.workramp.com/blog/strategies-to-prevent-employee-turnover/

Halvorson, C. (2015). 12 employee onboarding best practices every business owner needs to know. http://wheniwork.com/blog/employee-onboarding-best-practices/

Harrison, A. (2020, February 21). The pros and cons of employee turnover. https://www.ambitionspersonnel.com/blog/2020/02/the-pros-and-cons-of-employee-turnover?source=bing.com

Ho, H. C. Y. (2023, March 27). Work–life balance, health and wellbeing. International Journal of Environmental Research and Public Health. IJERPH. https://www.mdpi.com/journal/ijerph/special_issues/Work_Life_Balance

Indeed. (n.d). The basics of employee turnover: Steps to prevent. https://www.indeed.com/hire/c/info/employee-turnover

Mahan, W. (2022, August 24). Why exit interviews are critical to employee retention. workinstitute.com -. https://workinstitute.com/why-exit-interviews-are-critical-to-employee-retention/

Senyucel, Z. (2009). Managing Human Resources in the 21st Century.

SHRM. (n.d.). Managing employee retention. https://www.shrm.org/resourcesandtools/tools-and-samples/toolkits/pages/managing-for-employee-retention.aspx

Skelton, A. R., Nattress, D., & Dwyer, R. J. (2020). Predicting manufacturing employee turnover intentions. Journal of Economics, Finance and Administrative Science, 25(49), 101-117. https://www.emerald.com/insight/content/doi/10.1108/JEFAS-07-2018-0069/full/html

Strain, M. (2016, October 26). The advantages of reducing employee turnover. https://smallbusiness.chron.com/advantages-reducing-employee-turnover-17599.html